There has been a slowing down of the loan growth in Jamaica’s financial system but the sector remains sound and properly capitalised. That is the view of Bank of Jamaica (BOJ) Governor Richard Byles who advised that, “although the pace of loan growth has slowed due to the moderating impact of the pandemic, it continues to be positive”.
The stock of private sector loans and advances recorded year-on-year growth of 8.4 per cent at May 2021, compared to growth of 13.4 per cent a year earlier. At the same time, non-performing loans remain well below the threshold for concern and are fully provided for by the system.
In relation to the foreign exchange (FX) market, Byles emphasised, “notwithstanding recent movements in the exchange rate, the pace of depreciation is better than we experienced last year. At August 16, 2021, the exchange rate was J$155.08 to US$1, representing a depreciation of 8.7 per cent for the calendar year to date.
He made the point that while this movement is still too high for comfort, it compares favourably with the 12.0 per cent depreciation that occurred over the same period of last year. Even in this period of economic uncertainty, the BOJ governor pointed out that foreign currency flows have remained strong and business or individuals in Jamaica who require foreign exchange have been able to access it.
For the calendar year to August 16, 2021, daily purchases of US dollars by authorised dealers and cambios averaged US$36.2 million, higher than the average of US$29.9 million recorded over the same period last year. At the same time, daily sales to end users excluding sales to BOJ averaged US$33.2 million since the start of 2021, well above the average of US$26.6 million a year earlier. For the calendar year to August 16, the BOJ purchased US$1.1 billion from the market via market surrenders, which pays Government of Jamaica debt servicing and facilitates some energy imports.
The BOJ has also continued to intervene in the market when temporary shortfalls have been identified. Total BOJ Foreign Exchange Intervention and Trading Tool (B-FXITT) flash sale operations and direct sales to the energy sector for the calendar year to August 16 has amounted to US$484.0 million.
At August 16, 2021, Jamaica’s gross international reserves remain healthy, amounting to US$4.2 billion (the equivalent of 128 per cent of the level considered adequate). Looking forward over the next two years, the BOJ projects that the current account deficit of the balance of payments will remain at sustainable levels of about two to four per cent of gross domestic product. This reflects the earlier mentioned expectations for a recovery in tourist arrivals and spending. While supported by the favourable outlook for the current account, the BOJ’s outlook for the gross reserves also anticipates the receipt of an International Monetary Fund allocation of Special Drawing Rights by end September 2021. This allocation will boost the reserves by the equivalent of US$520 million (approximately). The BOJ governor concluded that, “by any standard, Jamaica’s foreign currency liquidity position will be more than sufficient to support the economy, if needed, in the foreseeable future”.
